When Does the Landlord’s Duty to Refund a Security Deposit Start to Run?

Security deposits remain a bone of contention in commercial leasing litigation, particularly now that COVID-19 eviction restrictions have been lifted. Typically, the obligation to return the security deposit begins when the tenant surrenders the premises. The following scenario, which is based on an actual case, illustrates some of the issues that may arise in determining whether a surrender has occurred.

SITUATION

April 15: A tenant signs a five-year lease and makes a $9,000 security deposit payment on a vacant office building for use as a daycare center.